Here's What QE Does To The Price Of Gold

Gold price surged on the back of QE-Infinity (and the hope of it before the launch).

The myth that the Fed is somehow more reckless than everyone else in printing money has been cited again and again as a reason to buy gold. No doubt about that, as the Fed starts QE-Infinity, these talks are back. Of course, we showed that the scale of Fed's balance sheet expansion is nothing compared with some of the Fed's peers. Still, there has been a large expansion of the Fed's balance sheet. So exactly what does central banks' balance sheet expansion do to gold prices?

The chart below shows the year-on-year change of Gold priced in US$ and the year-on-year change of Fed's balance sheet.